Weekly Trader's Outlook

If you read last week's blog you might recall that my forecast for this week "Neutral to Slightly Bearish," expecting continued consolidation of significant gains over the prior seven weeks. At the time of this writing the SPX is up 1.6% on the week so my forecast turned out to be wrong. Most of this week's gains are coming from today's jump following a stronger-than-expected Nonfarm Payrolls report (more on this in the "Economic Data, Rates & the Fed" section below). As long as the job market remains strong, and the potential economic disruptions from trade and tariffs remain in check, it appears that the S&P 500 wants to test all-time highs (6,144) at some point over the next month.

On the trade front, while U.S. President Donald Trump appeared to be upset at China for not honoring agreements from the recent trade truce, it was reported that Trump and Xi had engaged in a phone call this week and will meet in the near future to conduct discussions around trade. That certainly doesn't provide a lot of clarity around where trade terms will finally land, it at least provides some interim relief for markets. Elsewhere, the European Union's top trade negotiator, Maros Sefcovic, met Wednesday with U.S Trade Representative Jamieson Greer and said that progress has been made, but have yet to reach a substantive trade agreement. The bottom line is that uncertainty around trade remains elevated, and the 90-day trade negotiation window is set to expire in about a month.

Elsewhere, the honeymoon between President Trump and Tesla CEO Elon Musk appears to be over as the two leaders engaged in a harsh exchange of words on social media yesterday, driven by Musk's criticism of Trump's "Big Beautiful Bill." Whether Trump and Musk will be able to repair relations remains to be seen, but shares of TSLA lost nearly 15% yesterday, triggering some broader market selling on the news.

At the time of this writing (2:05 p.m. ET), stocks are trading near the highs of the session, and this is despite yields on 10-year Treasuries rising back to the key 4.50% level. Regarding Treasury yields, I think today's rise across the term structure is being driven by the better-than-expected jobs report, and investors are more comfortable if yields are rising because of improving longer-term growth expectations (rather than concerns over deficits and fiscal sustainability). Regarding the technicals, the Russell 2000 is beginning to show signs of life, and the S&P 500 is (currently) back above the key psychological 6,000 level (more on this in the "Technical Take" section below). Next week Apple will hold its Worldwide Developer's Conference starting Monday, but expectations appear to be low following the company's struggles around its AI initiatives. On the economic front, we'll get the monthly inflation reports on Wednesday/Thursday (CPI and PPI), which have been relatively cool over the past two months, but always hold the potential to deliver a market-moving surprise. We'll also get a couple of key long-term Treasury auctions on Wednesday (10-year) and Thursday (30-year), but bond volatility has settled down considerably from a couple weeks ago. While trade headlines remain a potential market-moving catalyst, the near-term technicals still seem to favor the bulls. Therefore, my forecast for next week is "Slightly Bullish." What could challenge my outlook? The most likely culprits in my view would be a negative inflationary surprise from the CPI/PPI, a poorly received Treasury auction and subsequent push higher in yields, or a trade-related "tape bomb."

Other Potential Market-Moving Catalysts:

Economic:

• Monday (6/9): Wholesale Inventories
• Tuesday (6/10): -no reports-
• Wednesday (6/11): Consumer Price Index (CPI), EIA Crude Oil Inventories, MBA Mortgage Applications Index, Treasury Budget; 10-year Treasury Note Auction
• Thursday (6/12): Producer Price Index (PPI), Continuing Claims, EIA Natural Gas Inventories, Initial Claims; 30-Year Treasury Bond Auction
• Friday (6/13): University of Michigan Consumer Sentiment - Preliminary

Earnings:

• Monday (6/9): Casey's General Stores Inc. (CASY), Calavo Growers Inc. (CVGW)
• Tuesday (6/10): J.M. Smuckers Co. (SJM), Core & Main Inc. (CNM), Academy Sports and Outdoors Inc. (ASO), GameStop Corp. (GME), GitLab Inc. (GTLB), Dave & Buster's Entertainment Inc. (PLAY)
• Wednesday (6/11): Chewy Inc. (CHWY), SailPoint Inc. (SAIL), Victoria's Secret & Co. (VSCO), Oracle Corp. (ORCL)
• Thursday (6/12): Lovesac Co. (LOVE), RH Inc. (RH)
• Friday (6/13): -no reports-

Other:

• Apple's Worldwide Development Conference (WWDC) kicks off (6/9-6/13)

There was an above-average dose of economic data this week which was highlighted by this morning's Nonfarm Payrolls report. There's a bit of a relief rally in stocks in response to this morning's monthly jobs report, following a soft ADP report and higher than expected Initial Weekly Claims data earlier in the week. A strong labor market, along with rising wages, correlates with a stronger consumer and overall healthy economy. Yes, there has been a modest decline in payroll gains over the past three months, but the data has been "better-than-feared" in my view. Here's the breakdown from this week's reports:

• Nonfarm Payrolls: Rose by 139K in May, which was slightly above the +125K expected. However, two-month revisions subtracted 95K, which puts the three-month average at 135K.
• Unemployment Rate: 4.2% vs. 4.2% expected. However, the size of the labor force declined by over 600K which helped keep the unemployment rate subdued.
• Average Hourly Earnings: +0.4% vs. +0.3% expected, bringing the year-over-year gain to +3.9%.
• ADP Employment Change: +37K vs. +99K expected.
• JOLTs – Job Openings: 7.391M, which was above both the prior month's reading of 7.192M and the 7.10M economists had expected.
• Construction Spending: -0.4% vs. +0.2% expected.
• Productivity-Revised: -1.5% vs. -0.8% expected.
• Unit Labor Costs: +6.6% vs. +5.7% expected.
• Initial Jobless Claims: Increased 8K from the prior week to 247K, and above the 237K expected. Continuing Claims decreased 3K from last week.to 1.904M.
• The Atlanta Fed's GDPNow "nowcast" for Q2 GDP was revised down to +3.8% yesterday from +4.6% on June 2nd.

Volatility in U.S. Treasury yields has subsided over the past two weeks but are up over the past week, primarily driven by this morning's Nonfarm Payrolls report. Compared to last Friday, two-year Treasury yields have moved higher by ~14 basis points (4.04% vs. 3.90%), 10-year yields are up ~7 basis points (4.48% vs. 4.41%), while 30-year rose ~2 basis points (4.94% vs. 4.92%).

Expectations around potential rate cuts from the Federal Reserve dropped this week, primarily driven by this morning's firmer-than-expected monthly jobs data. Per Bloomberg, while expectations for a 25-basis-point cut at the July Federal Open Market Committee (FOMC) meeting have moved down to 16% from 28%, and the total 2025 expected 25-basis-point cuts are now down to 1.77 from 2.19 (both on a week-over-week basis).

Small caps are exhibiting some relative strength today (+1.48% vs. COMP + 1.0% and SPX +0.90%) and the Russell 2000 (RTX) is currently trading at three-month highs. While the RUT remains below its 200-day Simple Moving Average (SMA), the index is showing incremental technical improvement as evidenced by this week's move above the 100-day SMA. Additionally, assuming today's gains hold, it appears that the RUT is moving above the neckline of an inverse head-and-shoulders pattern, which would be a bullish development. I'd also point out that the index is exhibiting this bullish price action in the face of today's rise in Treasury yields, which is also supportive of a near-term bullish perspective.

Near-term technical translation: bullish

The S&P 500 index (SPX) continued its recovery this week and remains in "melt-up mode" as the index is only ~3% below all-time highs. It's impressive to see this type of bullish resiliency despite the uncertainty that surrounds global trade and its potential economic impact. However, on a very-near-term basis, it appears that the index is having some trouble making a convincing move above the 6,000 level. There isn't necessarily technical resistance at this level, but it's not uncommon to see some psychological hesitancy at these large round numbers.

Near-term technical translation: cautious/slightly bearish

The number of public companies holding Bitcoin (BTC) has more than doubled over the past year, according to the Monthly Market Insights report from Binance Research. At the end of May there were 116 public companies holding a combined 809,100 BTC versus 312,200 BTC held at corporate treasuries just a year ago. The report also identified a significant increase in tokenized real-world asserts (RWAs), which are up over 260% to $23B this year. Binance attributed the wider adoption to a combination of BTC price appreciation and structural tailwinds, including the Trump administration's pro-crypto stance and the introduction of new fair-value accounting rules by the Financial Account Standards Board (FASB).

The Bloomberg chart below shows the current percentage of members within the S&P 500 (SPX), Nasdaq Composite (CCMP) and Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). In short, stocks are higher on the week, but market breadth didn't expand as a result. On a week-over-week basis, the SPX (white line) breadth eased to 48.80% from 50.00%, the CCMP (blue line) ticked up to 34.66% from 34.41%, while the RTY (red line) is essentially unchanged at 32.54% versus 32.67%.

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, percentage of stocks within an index that are above or below a longer-term moving average, or new highs vs. new lows.

This Week's Notable 52-week Highs (92 today): Booking Holdings Ltd. (BKNG + $11.96 to $5,582.48), Broadcom Ltd. (AVGO - $8.88 to $251.33), CrowdStrike Holdings Inc. (CRWD + $9.59 to $472.53), GE Vernova Inc. (GEV - $1.31 to $482.00), Intuit Inc. (INTU + $1.52 to $768.16), Netflix Inc. (NFLX - $3.41 to $1,247.11)

This Week's Notable 52-week Lows (16 today): Bio-Rad Laboratories Inc. (BIO + $2.23 to $221.54), Brown Forman Inc. – Class A (BF/A + $0.62 to $28.03), Builders FirstSource Inc. (BLDR - $0.77 to $112.59), Clorox Co. (CLX + $0.76 to $128.06), Regeneron Pharmaceuticals Inc. (REGN + $14.77 to $497.84), Teleflex Inc. (TFX + $0.98 to $123.44)